Governor Andrew M. Cuomo has declared a State Disaster Emergency for five counties affected by the March 2018 Nor’easters that began on March 2, 2018, and on March 9, 2018. As a result, the Acting Commissioner of Taxation and Finance has postponed certain tax filing and payment deadlines for taxpayers who were directly affected by these storms. The relief provided for applies to taxpayers directly affected by the storms in the counties of Dutchess, Putnam, Rockland, Sullivan, and Westchester.

Volume 9 - Opinions of Counsel SBEA No. 108

A non-Indian lessee’s interest in land owned by the Seneca Nation of Indians and located within the Allegany Reservation is subject to real property taxation. The lessee’s interest in any improvements on such land is also subject to taxation, whether or not the lessee owns the improvements.

The greater part of the City of Salamanca, Cattaraugus County, is located within the Allegany Reservation of the Seneca Nation of Indians. Most of the land within the City has been leased by the Seneca Nation to non-Indians. Leases which were renewed in 1892 expired in 1991 and were again renewed under terms which are widely considered to be less advantageous to the lessees (e.g., the new leases are for a 40-year period - see Governor’s Approval Memorandum for L.1991, c.528).

During the terms of the 1892 leases, many lessees built improvements on the land. The lessees assumed they owned these improvements, and they paid the real property taxes on the improvements without objection. However, the renewal of the leases has created some uncertainty as to whether the improvements are owned by the lessees or by the Seneca Nation. Some of the lessees have objected to paying taxes upon improvements to which their title is unclear. The question presented is essentially whether such improvements may be subjected to taxation if they are, or may be, owned by the Seneca Nation.

Lands in the Allegany Reservation are immune from any taxation which would interfere with the Seneca Nation’s interest therein (see, 25 U.S.C. 233; see also, Indian Law, § 6; Real Property Tax Law, § 454; 1 Op.Counsel SBEA No. 84). However, the property of all non-Indians, within the limits of an Indian reservation, is subject to taxation by the State (Thomas v. Gay, 169 U.S. 264, 18 S.Ct. 340, 42 L.Ed. 740 (1898); Wagoner v. Evans, 170 U.S. 588, 18 S.Ct. 730, 42 L.Ed. 1154 (1898)).

New York State has subjected to taxation the lessees’ interest in real property leased from the Seneca Nation. Section 71 of the Indian Law provides that property in the Allegany Reservation “held under lease from the Seneca nation of Indians . . . shall be for all purposes considered a freehold estate. . . .” The term “freehold estate” refers to a fee simple or a life estate (former Real Property Law, § 33; Estates, Powers and Trusts Law, § 6-1.1). A person who holds either a fee simple interest or a life estate in real property is considered the owner of the property for purposes of real property tax administration (see, e.g., 9 Op.Counsel SBEA No. 41). Thus, as we have stated:

Ever since the enactment of section 71, real property in the city [i.e., Salamanca] has been treated under the general laws of the State as though it were owned by the lessees rather than by the Seneca Nation. Insofar as taxation is concerned, the taxes levied by the City of Salamanca are considered to be levied against the leasehold estate and a conveyance under a tax sale conveys only the leasehold estate. (1 Op.Counsel SBEA No. 84)

This conclusion is not altered by the fact that the leases have been renewed since this Opinion was issued, even though the terms of the renewal leases may be less favorable to the lessees. Nor is the conclusion different where the leases pertain to both improvements and land, since both are considered real property for purposes of real property tax administration (RPTL, § 102(12)(b)).

Thus, if the improvements in question are owned by the Seneca Nation, and the non-Indian occupants have leasehold interests, these leasehold interests are taxable as freehold estates pursuant to section 71 of the Indian Law. If the real property taxes on such an improvement are not paid, the lessee’s interest therein (i.e., the unexpired portion of the lease) would be subject to foreclosure.

If the improvements are owned by the non-Indian occupants, rather than by the Seneca Nation, the improvements are taxable under the standards traditionally applicable to improvements (RPTL, §§ 102(12)(b), 300).

Hence, while there may be some uncertainty as to the ownership of the improvements, this does not affect their taxable status. Whether or not the occupants do own the improvements, they must be treated as the owners for purposes of real property taxation, and the property is subject to taxation on that basis. We express no opinion herein as to the ownership of any particular improvements.